[Andrew Ferguson]

Hi Folks, you may have heard me spouting off about picking up my new Golf GTi within a week or so, but just been told today that the Bank will not give me a loan, stating that they believe that i do not earn enough to pay it off; i do, but that's what they're saying. The dealership was initially offering me their own finance, was only ?9.00 per month more than the Bank Loan, works out at ?2700.00 interest over 60 months. Does anyone know if it's easier to get dealership finance than a bank loan, because if i'm also turned down for this, there's a spare GTi going, so anything constructive here chaps would be greatly appreciated...

Thanks.

 

[marriedblonde]

My personal opinion would be if you need to pay for a car over 5 years you can't afford it...

Have you tried somoe of the other finance places? There is a lot of places willing to lend you money!

J.

 

[SuperMario.Dave]

car finance is a hell of a lot easier,the criteria is lower,a bank loan can be used for anything,whereas a dealer loan isn't tachnically a loan,its HP,ie the car is still there's (same with a PCP)

5 years is too long imo,with depreciation you will be paying a fortune to drive that car (as a percentage of take home pay you will be astonished how mush when you include all the running costs,depreciation,fuel,tax,loan and interest,servicing,insurance...........work it out and be prepared!)

3 years as a secured loan makes sense,otherwise a PCP may be preferable if you are financing it as a company car opt out (I nearly did but at 40k private mileage a year my wife would have gone ape)

you will get the loan,no problem,unless you have CCjs against you,its the cost thats the prohibitor imo

 

[JMcQueen]

I took my finance out over 5 years but mainly because I've just bought a new house too and so wanted to keep the payments low whilst I get the house sorted. Once the house finished, more money will go towards getting the car paid off ASAP. In terms of your offer, if its only ?9.00 a month more than the bank, I wouldnt worry too much about it. ?2700 doesnt seem too bad since its over 5 years. Are you looking at borrowing the full value of the car or are you bringing new money to the table?

 

[simch]

May be worth listening to your bank, man. If they think you cannot afford that level of borrowing, they may well be right. 2700 over 5 years is about 47 squid a month interest so the extra 9 quid a month with vw finance is a fair percentage interest increase.

 

[Uzi9]

Ok a couple of questions to see if anyone can help. A bit personal so dont answer if you feel uncomfortable etc etc.

1. How much deposit/ up front money (cash) are you putting down?

2. Are you trading in anything? If yes, how much you getting?

3. How much were your monthly payments working out to (according to your plan) and how much above this can you afford i.e. what is your margin of safety.

Once you have figured out you can afford it (and I am sure that you have worked it out) phone up a few loan companies ASAP to get quotes. Try Egg and explain what the loan is for etc (they were prepared to offer me a loan where some others were not). I expect that VW will be desperate to get your business as you are buying a car from them. Also they make a fair amount from the credit. Be very wary of the interest rates they may offer you though as you may not get a very competitive quote. Ask how much payments will cost monthly and more importantly what the final overall amount paid will be. Once they come back with a figure, dont simply accept it and haggle a little. You are desperate for the car and they are desperate for your business. Don't panic, you will get the car you want. At the end of the day, you know your finances better than anyone and know how much you can budget. Good luck.

 

[M4XVW]

You could try and get it on credit cards.

Two credit card companies have lent me 30,500 (approx 15k each) at 0% for 9 and 12 months, and before them it was with other 0% lenders.

So as I type it is earning 5.10% until I pick my GTI up in 45 days [].

Amazingly MBNA / Virgin let you transfer your credit limit in CASH to your bank account [:O]

Total monthly repayments are a highly reasonable 270.

 

[Uzi9]

Again, credit cards may be the answer but I doubt that you would get the necessary limit if your bank turned you down for a loan. Also be very careful about the introductory rates e.g 0% for 9/12 months. The rates after this can be very high 15/20% + not uncommon. If you fancy balance transferring to another 0% card near the end of the introductory term you may not get credit and will be stuck with a rubbish interest rate.

 

[simfin]

Would the best route for you now be the 'balloon' payment. I think they are also called PCP's. I personally think these can be a very expensive way of financing a car, but if you really can meet the monthly payments that the bank say you can't, then simply pay the PCP per month and bank the rest that would have gone to the 5 year loan payment. You may also have the option of ending the finance early if and when your 'saved' funds reach a suitable amount.

But, I would look very carefully at your figures again. The bank has obviously refused you for what they see as a valid reason. Remember, that they would love to have all that interest off of you, but also do not want to get involved with a 'potential' credit risk (no offence meant).

Lastly, I would definitely steer clear of any of these loan agencies that off 'no quibble' easy loans. They are usually sky high interest, and can get very nasty when payments fall behind.

 

[SuperMario.Dave]

be careful of 'baloons',they fudge the final vlaue of the car down,or the value if the baloon up,in order to keep the monthly payments attractive.If you go for a PCP,check all these things first

Alliance and Leicester do a PCP for anyone,you don't have to be a customer of theirs,and of course you can buy any car with the money

 

[Richard W]

Quote: posted by marriedblonde on 02/04/2005 18:54:41

My personal opinion would be if you need to pay for a car over 5 years you can't afford it...

IMHO He's right, 5 years is too long, one word - depreciation - you'll loose more than half the value of the car and the interest, which on a basic calculation means about ?13-14k over those 5 years.

Come down ?5-7k and get an alternative second hand car that may be faster... ?15k buys a lot of car these days, can be paid for over 3 years and won't heamorrage money like a new car does.

 

[byebyegti]

take a loan and the car is yours to do whatever mods you want! take out hp, and the car still remains property of the lender (HP agreement),

However under HP agreement, you do have the right to voluntary surrender the car after 50% paid off. ie. take over 5 years, then hand back any time after 2.5years and walk away from it! provided you have not taken any additional addons from the dealer, you will have nil liability and free to go get another car elsewhere. May seem expensive to pay for a car for 2.5years then walk away, but there would probably be negative equity on the car at this point anyway!! Also gives extra leverage if you are having problems with the car and the dealer are not being any help...you can contact the finance company and request they get involved as you have a 3 way agreement.

 

[simfin]

I also agree about the 5 years loan if you are to keep the car for that period. If however, you know that some extra funds may become available soon then it may a good way of getting a low monthly payment to begin with.

I personally have got mine on a five year loan, but have effectively got the full cost of the car paid for by my company (gone private instead of company car). This means that I can have a few grand in the bank, working off the interest of my mortgage, while keeping a low monthly payment. Works for me, but not everyone get's a monthly co-car allowance of course.

A 5 year loan should not be dismissed, as if you get a 5.7% interest rate over 5 years, then the interest paid in total is not that much, when compared to the overall cost of running cars.

One question I would ask of the original poster is - Have you also checked your insurance premium ?(not wishing to be rude), but check the full yearly premium, not the cost to change from current car for the remaining period. Obviously I am not aware of your age etc, but it may be worth bearing in mind.

 

[Andrew Ferguson]

Aye up, in direct response to your point, if i were to ask you if you have a mortgage on your house, no matter the term, and then suggest to you that if you need 15-25 years to pay for your house, then you can't afford it, what would you say, lol??

My personal opinion would be if you need to pay for a car over 5 years you can't afford it...

Have you tried somoe of the other finance places? There is a lot of places willing to lend you money!

J.

 

[Andrew Ferguson]

Quote: posted by simfin on 03/04/2005 10:20:11

I also agree about the 5 years loan if you are to keep the car for that period. If however, you know that some extra funds may become available soon then it may a good way of getting a low monthly payment to begin with.

I personally have got mine on a five year loan, but have effectively got the full cost of the car paid for by my company (gone private instead of company car). This means that I can have a few grand in the bank, working off the interest of my mortgage, while keeping a low monthly payment. Works for me, but not everyone get's a monthly co-car allowance of course.

A 5 year loan should not be dismissed, as if you get a 5.7% interest rate over 5 years, then the interest paid in total is not that much, when compared to the overall cost of running cars.

One question I would ask of the original poster is - Have you also checked your insurance premium ?(not wishing to be rude), but check the full yearly premium, not the cost to change from current car for the remaining period. Obviously I am not aware of your age etc, but it may be worth bearing in mind.

Thanks for your helpful comments folks on this thorny issue. I hope i can answer some of your more pertinent points..

1) I am 32, already drive a MK IV GTi,and yes, i have discovered how much more per month the insurance will be, about ?20.00 per month more.

2) With reference to someone's point on depreciation, running costs, etc, i of course acknowledge that the GTi will depreciate in value, that taken as 'read', but would like to think that even after 5 years, that i could still get ?6-8 k back. I shall be paying about c.?25.00 per month to VW to cover 'Servicing, Maintenance, and Tyres' so i hope this will alleviate any additional costs over the 5years. I've already covered fuel, tax + insurance with the fact that i already know these first-hand as i already own a Mk IV GTi.

3) I shall be stumping up about ?5 k up front, so no, the loan is not to cover the full amount. Yes, i am part-exchanging my wife's V reg Susuki Swift and getting ?1000.00 for that. We're also in the process of selling my Mk IV, so my wife can purchase let's say a more female type car, which will of course save us a hell of a lot there.

Sure, i could stump up more cash if i wanted to and lower the amount to borrow, but 'rainy day and all that'. I shouldn't need to anyway, i know i can well afford the repayments, but would rather keep my savings where they are..

Thanks everyone for your responses; for a moment there, some of you nearly convinced me not to go ahead with this purchase, but to those who have given me encouragement, thank you. You only live once, about time i bought a new car, why else do some of us work our bums off each day. Helps i suppose when your spouse is a Supply Teacher and earns a small fortune..[)]

 

[Bernie]

Have you tried haggling on the interest rate with the dealer. Finance is also bargaining tool like haggling on the price of the car. But I believe there would be no discounts on the car itself as they are in limited nos. at present.

 

[marriedblonde]

Quote: posted by Andrew Ferguson on 03/04/2005 13:40:55
Aye up, in direct response to your point, if i were to ask you if you have a mortgage on your house, no matter the term, and then suggest to you that if you need 15-25 years to pay for your house, then you can't afford it, what would you say, lol??

I'd say that in most cases houses increase in value. What your planning on buying is something that is going to loose 60%-70% over the term of the loan!

You obvioulsy don't want to listen to people on here, why don't you speak to an independant finacial advistor and listen to what they have to say?

 

[Andrew Ferguson]

Quote: posted by marriedblonde on 03/04/2005 14:59:43
Quote: posted by Andrew Ferguson on 03/04/2005 13:40:55
Aye up, in direct response to your point, if i were to ask you if you have a mortgage on your house, no matter the term, and then suggest to you that if you need 15-25 years to pay for your house, then you can't afford it, what would you say, lol??

I'd say that in most cases houses increase in value. What your planning on buying is something that is going to loose 60%-70% over the term of the loan!

You obvioulsy don't want to listen to people on here, why don't you speak to an independant finacial advistor and listen to what they have to say?

It's not a case of 'not listening' as you put it. My initial question was merely asking the different options around and their availability. Everyone knows that their car, new or used, will depreciate in value over time, that's not in dispute here, it was just your assumption that because i can't stump ALL the money up front, that i can't afford the GTi, considering you know nothing about my circumstances; that's why i gave a rather long winded, albeit detailed response..
I do appreciate your contribution though; perhaps you could give me a cut and blowdry and we'll speak no-more about it, lol...

 

[grumpybora]

This begs a very interesting question.

i.e I drive around the South East and wonder at all the young people in 20K plus cars. They can't all be big earners, is it the price of credit? do they live at home with their parents? Or are people prepared to spend huge fractions of their salaries on cars?

 

[craigGSI]

If some one can afford to pay the monthly payment for the car then it shouldnt matter how long it is over as long as they can afford the payments

so to say that taking a car over 5 years means you cant afford it is rubbish

When i take out finance i prefer to take it over 4 years tbh as it normaly suits but if there was a car i realy wanted and it was a little higher then i would take it over 5 years

at the end of the day after you have paid 2.5 years (half the payments) it can legaly be handed back so no worry about loss in value and trying to sell it

As said before you can haggle on the %APR and this can also make a huge difference in monthly payments. I was looking at a vectra SRI TDI and the payments were ?314 per month. I told him to get it down to ?290ish and i would consider taking it. He went away and came back and told me that his boss agreed to drop the APR down to the lowest of 5.5% and it took the payments right down

Thats my 2p worth []